While Edison toiled to commercialize his electric lamp, Tesla worked through a problem that had intrigued him since he was a student at the Joanneum Polytechnic School in Graz, Austria. While a student there, Tesla saw a demonstration of a Gramme dynamo. A dynamo is a generator that uses a commutator -- contacts mounted on the machine's shaft -- to produce direct current instead of alternating current. Tesla mentioned to his instructor that it might be possible to do away with the commutator, which sparked horribly as the dynamo operated. This suggestion brought ridicule from his teacher, but it captured Tesla's imagination.

In 1881, Tesla had an inspired idea: What if one were to change the magnetic field in the stator of a dynamo instead of altering the magnetic poles of the rotor? This was a revolutionary concept that turned convention on its head. In a traditional dynamo, the stationary stator provides a constant magnetic field, while a set of rotating windings -- the rotor -- turns within that field. Tesla saw that if this arrangement were reversed, the commutator could be eliminated.

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Of course, bringing this idea to reality would take years of work. Tesla began in 1882 while employed at Continental Edison Company in Paris. During the day, he would install incandescent lighting systems based on Edison's DC power system. In his spare time, he would experiment with AC motor designs. This went on for two years, until Tesla transferred to the Edison Machine Works in New York City. By some accounts, Tesla described his ideas about AC to the famed American inventor, but Edison showed no interest. Instead, he had Tesla make improvements to existing DC generation plants. Tesla did so, only to be disappointed when Edison failed to pay him properly. Tesla quit, and the paths of the two men diverged permanently.

After digging ditches and getting caught in a bad business deal, Tesla finally received financial backing from Charles Peck, an attorney, and Alfred S. Brown, a superintendent at Western Union. Peck and Brown helped Tesla establish a laboratory just a few blocks away from Edison's lab in Manhattan, and encouraged the young engineer to perfect his AC motor. Tesla did just that, building what would become known as a polyphase induction motor. The term polyphase refers to a motor based on multiple alternating currents, not just one. The term induction refers to the process whereby the rotating stator magnets induce current flow in the rotor. Tesla's original motor was a two-phase version that featured a stator with two pairs of magnets, one pair for each of two phases of AC.

In 1887, Tesla filed for seven U.S. patents describing a complete AC system based on his induction motor and including generators, transformers, transmission lines and lighting. A few months later, Tesla delivered a lecture about his revolutionary new system to the American Institute of Electrical Engineers. The lecture caused a sensation and, despite an anti-AC campaign initiated by Edison, convinced many experts that an AC power system was more than just feasible -- it was far superior to DC.

To bring a good idea to market, it takes some clout. In this case, the clout came from an inventor who made a fortune in the railroad industry. Read more about his support of Tesla's work on the next page.